Four more Aim shares to invest in today

The future is bright for uranium

(Image credit: © DAVID BOILY/AFP via Getty Images)

published 10 June 2022

How to hunt down the best Aim stocks Three mistakes to avoid when investing on Aim Four Aim stocks to buy for 2022

The second half of 2022 is approaching. Six months isn’t much of a time horizon, even for a relatively short-term trader. But as I have a new batch of Aim stocks for you to consider today, let’s check in with my picks from the start of the year (‘Four speculative Aim shares for 2022’, 7 January 2022) to see if the theses still hold.

My first pick was cleaning services firm React Group at 1.4p. Small caps can be volatile, with the stock trading above 2p only to close as low as at 1.10p recently. The company raised its market capitalisation in cash for the acquisition of LaddersFree – a capital-light business that the board believes can be integrated into React’s offering then scaled up. Shareholders may be smarting from this, but the board believes this is an incredible opportunity given LaddersFree’s service partner network and its impressive gross margins of more than 50% in the last two trading years.

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Chair Mark Braund believes this can even grow – LaddersFree recently won a competitive tender which apparently came in “significantly below” the price of the next competitor. The deal is materially earnings-enhancing and none of the board are taking large six-figure salaries from the company (unlike many Aim shares), instead aiming to be remunerated through their options. Put simply, there is no reason to do this deal unless the board believes in the long term. So while there may be short-term pain, the investment thesis hasn’t changed.

My third pick was iodine producer Iofina at 18p. The stock has risen slightly but I’ve chosen to sell. The company is benefiting from a rising iodine price ($40 in October – now more than $60). Construction of its IO#9 plant was ‘in negotiations’ in the interim results in September 2021 and still in negotiations in December 2021 with the company expecting to “finalise an agreement in early Q1 2022”, and “close to finalising an agreement” in April 2022. Management has repeatedly failed to deliver, with zero acknowledgement of previous goals, nor any reason as to why Q1 turned into Q2 which will likely now turn into Q3.

Operationally, the company continues to trade in line with expectations and looks cheap, but this lack of communication, coupled with a hard-to-research commodity market, means I have chosen to sell due to my lack of trust and lack of understanding. I suspect it will perform well should the iodine market tighten. Iofina has been transformed from the debt-ridden business it was a few years ago, but it’s not for me.

My final pick was Yellow Cake at 340p. It has traded as high as 485p but is currently around 372.5p. Uranium is starting to gain traction, with prime minister Boris Johnson pledging to move the UK towards nuclear power. Uranium miner Cameco noted in a recent earnings call that contracting in the first quarter was already above the 2021 total – a sign that utilities are now looking to lock in agreements. Yellow Cake is a pure play on uranium – with the investment case looking stronger, I remain a holder.

It just shows that even a mere six months can offer investors a wild ride in terms of volatility. This can even create opportunities – if you sold Yellow Cake at 480p you could now buy back the same shares at a discount of more than £1 – a nice turn! But it’s also a valuable reminder that share price fluctuations do not always reflect a great deal about the underlying business. The key is to do your own research and manage risk. Here are four more shares where I feel the potential upside is greater than the downside.

Digitalbox produces and publishes online content. It owns several publishers including Entertainment Daily, The Daily Mash, and The Tab. Its goal is to buy publishers that have great content but are struggling to monetise effectively. It has so far struggled to set the market alight, although in fairness 2020 saw ad revenue decline before starting to pick up by the end of the year. The company bought The Tab and is now seeing a return on investment, having integrated the business into Digitalbox’s proprietary Graphene platform. Digitalbox saw its first net profit in 2021 and is cash-flow positive. It bought TVguide.co.uk last month, which will immediately enhance earnings. This fits its model of buying smaller businesses then growing both the content quality and ad inventory. It’s a similar business mode to Future (MoneyWeek’s owner) but with one key differentiator: Digitalbox is primarily focused on mobile inventory.

Crestchic is a global business, and management believes it can be scaled up. Northbridge has completed a new loadbank production facility that will increase production capacity by 60% to meet strong levels of customer demand as well as future-proofing the business. Crestchic currently has 10% market share of the global power reliability market and the goal is to grow further in this expanding market.

The directors have been strong buyers of stock here, with Nicholas Mills, a non-executive, owning more than 24% of the stock. This is a turnaround play – the business has sold an unwanted unit and has a clear focus on growing production and capturing market share. The stock currently trades on a p/e of 15, so while it’s not cheap, the valuation is reasonable for a company now on a growth trajectory.

PCI-PAL is a solution provider for card-not-present (CNP) transactions. PCI-PAL solves the problem of the secure handling and storage of customer data for contact centres, which are increasingly becoming omnichannel. GDPR is a problem for clients because breaches and customer data misuse can carry huge reputational and financial penalties. Companies can instead outsource this risk to PCI-PAL and get on with focusing on their core business.

This makes PCI-PAL one of the most exciting companies on the London market because of the sheer size of its potential market. Last year, it raised £5.5m at 95p to accelerate growth. This pushed losses out even further, but the board believes that going after growth is the best strategy. Annual recurring revenue (ARR) has now gone above £10m, and customer churn rates are below 3% – in other words, once customers have signed up to the service, they are reluctant to leave. Not only that, but customers add users once signed up, which gives PCI-PAL net revenue retention of 118% as of the recent trading update.

The elephant in the room here is that the company is currently the subject of a lawsuit from one of its main rivals, Semafone. The directors believe it is unfounded, and have also gone on the attack with counterclaims against Semafone. Many investors would consider PCI-PAL uninvestable due to this legal risk. This is sensible. That said, I am long as the company’s growth is increasing and I believe a settlement will be reached.

So far Tiris has around 56 million pounds of uranium with a cut-off grade of 100 g/t. It also benefits from shallow, flat-lying surface mineralisation (a depth of one to five metres). This means that no drilling and blasting, or crushing or grinding is required. Every dollar increase in the uranium price trickles down to the bottom line, because Tiris has an all-in sustaining cost of $29.81 a pound.

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